Legislation not needed to improve insolvency process, service director says

Insolvency Service of Ireland director Lorcan O’Connor: “It will be the second quarter of 2014 before large volumes of cases complete the process.” Photograph: Eric Luke

Legislation to change the insolvency process is “neither contemplated nor necessary”, the director of the Insolvency Service of Ireland has said.

Lorcan O’Connor said the service hoped to develop a protocol with practitioners and creditors to streamline the insolvency process, but this would not require legislation.

The Personal Insolvency Act 2012 introduced three new insolvency measures for people in debt – debt relief notices, debt settlement arrangements and personal insolvency arrangements. But the process has been slow to start, with only 11 cases coming before the courts since the service opened for business last September.

TemplateA protocol would provide a template to make it easier for everyone involved to know what an acceptable insolvency arrangement looks like.

In the UK, a protocol was introduced a few years after insolvency legislation. It managed to speed up the insolvency system and resulted in acceptance rates for cases exceeding 90 per cent.

The insolvency service will host a conference next month to initiate discussion on development of the protocol.

Mr O’Connor said personal insolvency practitioners, now numbering over 100, were reporting a significant increase in the number of enquiries. The service expected its caseload to increase significantly in coming weeks and months, he said. He pointed out that legislation allowed a period of 70 days for a practitioner to agree an arrangement.

“Therefore it will be the second quarter of 2014 before large volumes of cases complete the process,” he said.

Noeline Blackwell, director general of the Free Legal Aid Centres (Flac) said a protocol would improve the system. From anecdotal evidence, she was aware there existed a wide variety of practices which made it harder for creditors and practitioners to reach a deal on an individual’s debts.

It was inevitable that the system would need adjustment “given the massive scale of this piece of legislation, which amends laws stretching back to Victorian times”, she said.

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She also suggested the requirement for a judge to sign off on every insolvency arrangement should be done away with.